The Dekagram: 17th June 2024

Articles

17/06/2024

This week’s Dekagram features a case involving an optimistic English claimant seeking to have his claim against an English defendant determined by the Spanish courts. It will be of interest to anyone advising on or litigating claims with a foreign element arising out of consumer contracts. Meanwhile the team is preparing for its forthcoming webinar on the Montreal Convention on 11th July, featuring a special guest – we’ll bring you further details on that next week.

NM v Costa la Club & Ors: Jurisdiction and Applicable Law in Consumer Contracts

Even in the pro-consumer domain of EU law, there is a limit to how far the concept of protection can be stretched towards bias, as the claimant before the Spanish Courts found to his disappointment in the case of NM v Costa la Club & Ors. (C-821/21) [2024] 1 WLR. 1571.

NM brought a claim before the Spanish Courts, seeking a remedy under Spanish law for an allegedly void timeshare agreement concluded with the principal defendant. The problem for him was that, despite his choice of forum and law, his case had undeniable Anglophilic properties: he was English; the counterparty to the contract he was alleging was void was English; there was an exclusive jurisdiction clause in favour of England in the contract; and the contract set out that it was governed by English law. A bold move, you might say for the quixotic claimant to tilt at his opponent under Spanish colours. But… he was a consumer – should he not be protected qua permitted to shop? His argument interested the Spanish courts enough to make a reference to the CJEU for clarification on both Brussels Recast and Rome I as to whether – I paraphrase – a consumer should be able to defy the wisdom of Mick Jagger.

Part 1 of the reference concerned jurisdiction and the Brussels Recast Regulation. Article 18 of the Regulation provides that a consumer may bring proceedings against ‘the other party to a contract’ either in the courts of the member state in which that party is domiciled or, regardless of the domicile of the other party, in the courts for the place where the consumer is domiciled.

NM’s argument here was that although the company with whom he had contracted, Club La Costa, might have been an English company, the contract had been entered into through an established Spanish branch and there were other members of the same group domiciled in Spain, closely connected with Club la Costa, with whom NM had not entered into the specific timeshare agreement, but with whom there were other contractual links. He sought an expansive reading of Article 18 which allowed ‘other party to a contract’ to include members of that wider class thus allowing him the choice of Spain as a forum.

The CJEU’s answer was that, notwithstanding the importance of consumer protection, the ‘other party to a contract’ meant what it purported to mean; it meant the natural or legal person who is a party to the contract in question and not to other persons, who were not parties to that contract, even if they were connected with that person. To interpret it otherwise to include ‘connected’ persons would not be consistent with the objective of ensuring a high degree of predictability as regards the attribution of jurisdiction. It would be incompatible with the principle of legal certainty.

Part 2 of the reference concerned applicable law. The claim was contractual and so the relevant regulation was Rome I. The central concern was the interrelationship between the rules on freedom of choice and consumer protection – Articles 3, 4 and 6. The plaintiff argued that although there was a choice of law clause in favour of English law, such a term was unfair and as a result the law could be chosen with reference to Article 4, which allowed a more nuanced approach to applicable law – including ‘close connection’ – thus allowing him Spanish law as his lex causae.

The CJEU had previously considered that a choice of law clause in a consumer contract which had not been individually negotiated, but was instead found in the supplier’s generic terms and conditions, could be unfair where it led the consumer into error by giving him the impression that only the contractually chosen law applies, without informing him that, under article 6(2) of Rome I, he also enjoyed the protection afforded by the mandatory provisions of the default applicable law (that is, his or her home country law) (Verein für Konsumenteninformation v Amazon EU Sarl (Case C-191/15) [2017] QB 252, para 71).

In principle, that might on different facts have meant that the particular choice of law clause in the relevant timeshare contract would have been invalid because it was contained in the general terms and conditions of the more powerful party. But on the facts of this case the two laws were the same so it made absolutely no difference: the law of the consumer’s domicile was England and the chosen law in the contract was English.

Furthermore, it would only be if the consumer contract did not fulfil the requirements set out in article 6(1)(a) or (b) – directing activities or establishing presence in the target Member State – that the court would fall back to determining the applicable law under article 4; if the contract did fulfil those requirements then Article 6 provided a complete answer. This was true even if the law under Article 4 would be better for the consumer. Again to interpret Rome I otherwise would be to undermine the general requirement of predictability and the principle of legal certainty, which the business as well as the consumer was entitled to rely on.

Although this is EU law, it remains clearly relevant in post-Brexit Britain as Rome I has been adopted unilaterally by the UK as retained EU law; and the principles relating to consumer protection from Brussels recast have been unilaterally adopted by the UK in the reformulated Civil Jurisdiction and Judgments Act 1982 sections 15A-E. Notwithstanding the passage of the Retained EU Law Act 2023 at the end of last year, CJEU interpretations of the language of these regulations continue to have some, albeit diminished, relevance in the English courts. Given this judgment from the CJEU is an orthodox one, which is highly unlikely to offend against English principles, there is little reason to think it would not be followed domestically.

About the Author

Tom Yarrow was called in 2018. Before joining chambers Tom was a civil servant working in various government departments, including as a policy advisor on the UK-EU Withdrawal Agreement at the Department for Exiting the European Union. During pupillage he worked with the Government Legal Department, practising in public law in the fields of public international law, justice and security, human rights and immigration. He has regularly appeared in judicial review proceedings for the Secretary of State for the Home Department, and as a member of the Attorney General’s ‘junior junior’ scheme, he is able to take instructions directly from government clients. He now practises in all of chambers’ practice areas and is an enthusiastic and valued member of the travel team.

Featured Counsel

Thomas Yarrow

Call 2018

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